The Benefits of Establishing a Branch or Subsidiary in Italy

Are you interested in expanding your company in a European country that boasts iconic culture and rich history? Then consider establishing a branch or subsidiary in Italy.

Many business owners and entrepreneurs have considered business expansion in Italy because it is the third-largest economy in the European Union and the eighth-largest economy in the world. However, there are plenty of other reasons why you should expand your business to Italy.

Some of the general benefits of establishing a branch or subsidiary in Italy include:

  1. Investor-Friendly Culture

    Italy welcomes investors from across the world with open arms. Its open economy is hospitable to those with the funds and resources to set up businesses that help boost it. The country’s government has taken many steps to make the business environment more friendly to foreign enterprises.

    This includes establishing a special committee in its Ministry of Economic Development that focuses on attracting new businesses from outside. The Italian Trade Agency is also actively assisting foreign investors in expanding their operations and supporting them throughout their investment’s lifecycle.

  2. Gateway to the European Union

    Italy is unique because of its strategic placement. The idiom “All roads lead to Rome” is a subtle reminder that Italy has well-established connections with other countries, particularly across the European Union.

    The country’s strategic position along the Mediterranean sea makes it an ideal trade hub for businesses seeking central access to North Africa and the Middle East. Approximately 20% of global maritime traffic occurs along its Mediterranean port.

    If you set up your business in this European Union country, you will receive duty-free access to tens of millions of customers across the economic region.

  3. Large Manufacturing Industry

    Italy’s manufacturing industry is one of its largest GDP contributors. The only EU country with a bigger manufacturing industry is Germany.

    Like Germany, Italy is also known for manufacturing high quality items and with cutting-edge designs. This makes it the perfect place to source metals, plastics, paper, plastics, ceramic, and textiles for your business.

  4. Heavy Focus on Innovation

    Italy has remained one of the most developed countries for thousands of years thanks to its heavy focus on innovation. This innovation continues today in the form of research and development.

    The country spends tens of millions of Euros on technological research and development. This has led to numerous digital innovations in its manufacturing industries. Such developments also benefit other businesses as the knowledge is often shared and helps reduce manufacturing costs.

  5. Access to a Skilled Workforce

    Italy is known for having high-quality education. It has two dozen world-class Universities. These educational institutions help produce skill workers in the Italian workforce.

    It is estimated that 300,000 students graduate from Italian universities each year. These graduates then go on to work in the country and drive its economy. If you establish a branch or subsidiary in Italy, you will definitely have ample skilled workers to choose from.

  6. A Unique Cultural Brand

    Like France and other European countries, Italy has a rich history that has shaped its current culture. Its unique art, food, and music culture attracts thousands of visitors each year. All this tourism benefits businesses in the country.

    This means your company can also benefit if you provide products or services for these tourists. Setting up a branch or subsidiary in Italy is therefore a great way to make your products and services available to a wide range of customers of different backgrounds.

  7. Numerous Policies and Investments to Improve Competitiveness

    Italy’s government has helped drive competitiveness among companies by putting many policies and incentives in place. This includes a 50% tax credit for private investments in research and development. They also offer a 40% deduction for those who invest in capital goods.

    Such policies encourage companies to innovate and grow. The end result is a better business environment where companies are at the top of their game.

Setting Up a Branch vs. Subsidiary in Italy

You might have used the terms “branch” and “subsidiary” interchangeably when referring to the idea of setting up business operations in another country. However, these terms differ in many ways so you should understand them before choosing what kind of entity to set up in Italy.

What is a Branch?

A branch is an independent business entity that performs operations under its own name but still functions under the company it is owned by. It is legally considered a part of its parent company and is therefore legally obligated to follow the local laws that govern said parent company.

In Italy, branches must be registered, even if they are conducting business activities independently. Their business name must also contain their parent company’s name.

Benefits of Setting Up a Branch in Italy

Some of the benefits of setting up a branch in Italy include:

  1. Understanding the Business Environment

    Many business owners set up branches in Italy because it helps them gain a good understanding of the local business environment. They can then decide whether they wish to set up more operations in the country. Branches are therefore considered a low-risk venture compared to subsidiaries.

  2. Cost-EfficiencyBranches are also believed to be more cost-efficient than subsidiaries. They have smaller annual turnovers and therefore have less tax liability and smaller overhead costs. This makes branches a great choice for business owners who wish to explore the Italian market while under tight financial constraints.

How to Set Up a Branch in Italy

You can set up a branch in Italy using the following steps:

  1. Register the branch with the Italian Registrar of Companies.
  2. Choose a branch representative. This representative’s name will be added to the Italian Registrar of Companies’ directory.
  3. Provide a business address in Italy. Alternatively, you may be able to use a virtual address.
  4. Obtain your Italian VAT number

What is a Subsidiary?

A subsidiary is a company that is controlled or owned by another company. An Italian subsidiary would be an incorporated entity that was created inside the country. All of this subsidiary’s capital could be owned by its parent company.

Alternatively, the subsidiary could be controlled by its parent company with the help of local partners.

Benefits of Setting Up a Subsidiary in Italy

Some of the benefits of setting up a subsidiary in Italy include:

  1. Being Legally Independent of the Parent Company

    The most upfront benefit of setting up a subsidiary is that it remains independent from its parent company. This separation means that the parent company is protected from any and all financial liabilities of the subsidiary.

  2. Easier Relations With Local Banks and Service Providers

    Many banks and service providers prefer to do business with subsidiaries than with branches due to financial and legal reasons. This means it is easier for subsidiaries to establish relations with banks and service providers.

How to Set Up a Subsidiary in Italy

If you intend to set up a subsidiary in Italy, you should first ensure you choose the right location. This is because different cities have different laws governing subsidiaries. So you should pick the location that offers the right balance of laws, supply chain, and market benefits.

You will also need to decide which type of business form your subsidiary should take. The common type is called societá a responsabilitá limitata (S.r.l.). This is the Italian equivalent of a limited liability company.

Once you have completed the initial planning and preparation, you can set up a subsidiary in Italy using the following steps:

  1. Execute your business’s public deed of incorporation and by-laws before a recognized public notary.
  2. Pay your registration tax
  3. Purchase corporate and accounting books
  4. Send your government grant tax amount  to the post office’s current account
  5. Register your subsidiary via Comunicazione Unica
  6. Inform the competent Labor Office (DPLMO) once you have begun hiring workers

Establish a Branch or Subsidiary in Italy With OpenAEuropeanCompany.com

Setting up a branch or subsidiary in another country can be a tall task. You will need to know the local laws and how to work with them to ensure your business is set up properly. The good news is that you can get through these hurdles with the assistance of an experienced professional company formation agent in Italy.

We have assisted numerous business owners set up branches and subsidiaries in Italy and are familiar with the registration process. Please contact us if you need guidance to expand your business to Italy.